MNI UK Data Preview: July 2025 Release

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• This week’s labour market and inflation data has taken on added significance after Governor Bailey’s interview with The Times at the weekend in which he noted that more easing could be needed if the labour market weakens more than expected.
• There will therefore be three factors we will be closely watching this week. First, headline inflation: we think that this is more important than core or services inflation at present. A number of MPC members have pointed to the nonlinearities of inflation expectations and with CPI expected to remain stubbornly above 3% and perhaps even move to the high 3%s consumer inflation expectations (and the baseline for wage negotiations into 2026) could remain uncomfortably sticky for the MPC. 
• Second, wage growth as this is expected to continue to decelerate faster than the BOE’s forecast. The BOE forecast Q2 private regular wage growth at 5.20%Y/Y and the 3-months to April already moved below this at 5.14%Y/Y. Further deceleration is expected this month with the median from the previews that we have read looking for a slowdown to 4.76%Y/Y in the 3-months to May.
• Third, payrolls data has shown a significant and sharp drop in employee numbers. The flash May print showed a fall of 109k and followed a (revised) April print of a fall of 55k. 

We look into these factors in more detail as well as presenting detailed consensus vs BOE forecast tables and summarising 15 sellside previews.